BASF and Gazprom sign asset swap agreement

12/24/2013

BASF and Gazprom sign asset swap agreement

MOSCOW -- BASF and Gazprom signed the final agreement to swap assets of equivalent value. Through the swap, the BASF subsidiary Wintershall will further expand its production of oil and gas and exit the gas trading and storage business.

The completion of the transaction is expected to take place mid-2014 and will be economically effective retroactively to April 1, 2013. The transaction was approved by the European Commission at the beginning of December 2013.

Through the agreement, two additional blocks of the Achimov formation of the Urengoi natural gas and condensate field in western Siberia will be jointly developed. Wintershall, a 100% subsidiary of BASF, receives 25% plus one share of the blocks IV and V in the Achimov formation. According to the development plan confirmed by the Russian mining authority, blocks IV and V have total hydrocarbon resources of 274 Bcm of natural gas and 74 MMmt of condensate. This is equivalent to a total of 2.4 Bboe. An annual plateau production of at least 8 Bcm of natural gas is expected from the two blocks.

Start of production is planned for 2016.

In return, Wintershall will completely transfer the currently jointly operated natural gas trading and storage business to its long-term partner Gazprom. Gazprom will also receive a 50% share in the activities of Wintershall Noordzee, which is active in the exploration and production of oil and gas in the southern North Sea (Netherlands, UK and Denmark).

“The asset swap will allow us to focus on profitable growth at the source in our targeted oil and gas-rich regions,” said Dr. Kurt Bock, Chairman of the Board of Executive Directors of BASF SE. “Through the joint development of additional blocks in the attractive Achimov formation, we will further expand our production of natural gas and condensate with our partner Gazprom.”

The expansion of activities at the source has already been successful. Since 2000, Wintershall’s production of crude oil and natural gas has increased from 80 MMboe to 126 MMboe in 2012.By 2015, the company plans to increase production to at least 160 MMboe. Especially the production of oil and gas in Russia and the northern North Sea is to be expanded.